Key Takeaways

  • HSA eligible expenses are defined by the IRS and cover a wide range of medical, dental, vision, and preventive care services.
  • To contribute to an HSA, you must be enrolled in a High Deductible Health Plan (HDHP) that meets specific deductible and out-of-pocket thresholds.
  • Qualified medical expenses include treatments and products used primarily to prevent or alleviate physical or mental illness.
  • Certain items, such as cosmetic surgery or general wellness products, are not eligible unless medically necessary.
  • Insurance premiums generally cannot be paid using HSA funds, except in limited cases like COBRA coverage, Medicare premiums, or while receiving unemployment benefits.
  • Keeping receipts and documentation is crucial to avoid tax penalties on non-qualified withdrawals.

HSA Eligible Expenses

HSA (health savings account) eligible expenses are those medical expenses covered by HSA funds. Types of expenses which may be included are:

  • Copays
  • Dental expenses
  • Vision expenses
  • Deductibles
  • Prescription medications
  • Some over-the-counter health-care products
  • Health care services

Over-the-counter, non-prescription medications are generally not included as qualified medical expenses. However, insulin is an exception.

Guidelines for spouses and dependents of enrollees are the same as for the employee, as long as the enrollee was married to the spouse during the time the spouse received the medical services or when payment was made for medical expenses. Dependents are eligible as long as they were claimed on an employee's taxes during the time when they received medical services or when expenses were paid.

Expenses are only considered eligible if they are incurred after the HSA effective date. Any expenses incurred before your effective date will not be covered or reimbursed.

How HSA Eligible Expenses Work

An HSA (Health Savings Account) allows individuals to use pre-tax dollars for qualified medical expenses, reducing overall healthcare costs. These accounts are designed to encourage saving for future health needs while providing immediate tax benefits. The IRS outlines specific categories of HSA eligible expenses, such as preventive services, doctor visits, prescription medications, and diagnostic tests.

In general, an expense is HSA-eligible if it primarily prevents or alleviates a physical or mental illness. For example, physical therapy for injury recovery or eyeglasses to correct vision qualify. However, expenses for cosmetic purposes, general wellness, or personal hygiene products typically do not qualify.

To use HSA funds efficiently:

  • Confirm that the service or product is IRS-qualified before purchase.
  • Retain all receipts and documentation for tax purposes.
  • Avoid paying for non-qualified items to prevent a 20% IRS penalty on those amounts.

HSA Eligibility

Before you can be eligible for an HSA, you must first be enrolled in what's known as a High-Deductible Health Plan, also known as an HDHP. This is a special health insurance plan. An HDHP has high deductibles, which is one of its disadvantages. However, your monthly premiums are typically much lower than those plans with lower deductibles. This makes HDHPs attractive for anyone who wishes to minimize upfront costs that often accompany quality health care.

High Deductible Health Plans and Contribution Limits

To open or contribute to an HSA, you must be enrolled in a High Deductible Health Plan (HDHP). The IRS sets annual limits for deductibles and out-of-pocket expenses that qualify a plan as HSA-eligible. For 2025, the minimum deductible for self-only coverage is $1,650, and for family coverage, $3,300. The maximum out-of-pocket expenses are $8,300 for individuals and $16,600 for families.

Additionally, the IRS establishes annual contribution limits for HSAs. For 2025, individuals can contribute up to $4,300, while families can contribute up to $8,550. Those aged 55 or older may make a catch-up contribution of up to $1,000.

These limits and qualifications ensure that only individuals enrolled in true HDHPs can benefit from HSA tax advantages. Employers often contribute to employees’ HSAs, further increasing the potential for long-term health savings growth.

What Counts as Qualified Medical Expenses?

The IRS determines which expenses are eligible for reimbursement and which are not eligible because health accounts are created by the tax code.

Just a few examples of what qualified expenses include:

  • Doctor's visits
  • Breast reconstruction surgery
  • Prescriptions
  • Eyeglasses and contact lenses
  • Acupuncture
  • Drug and alcohol addiction treatment
  • Dental treatment
  • Eye exams
  • Hearing aids
  • Hearing aid batteries
  • Fertility enhancements
  • Operations and non-cosmetic surgeries
  • Nursing services
  • Smoking cessation
  • Physical therapy
  • Psychiatric care

If you use an HSA to pay for expenses that are not qualified, you must pay income tax on those funds. A 20% penalty is assessed for non-qualified expenses.

Types of expenses that fall into the non-qualified category include:

  • Diaper service
  • Cosmetic surgery
  • Hair removal
  • Funeral expenses
  • Illegal treatments and operations
  • Health club fees
  • Maternity clothing
  • Over-the-counter medication with no prescription
  • Nutritional supplements
  • Toiletries such as toothpaste and toothbrushes
  • Teeth whitening products and procedures
  • Weight loss programs, unless prescribed by a doctor to treat a disease

For all health accounts, while qualified expenses are similar, expect some differences between health savings accounts and flexible spending accounts.

Eligible expenses are those that seek to alleviate or prevent certain illnesses, physical, or mental defects; this includes illnesses and issues related to dental and vision care. Other types of medical expenses that may be eligible include services and procedures pertaining to:

  • Ambulance rides
  • Yearly physical exams
  • Artificial teeth or limbs
  • Bandages
  • Body scans
  • Birth control pills
  • Braille literature
  • Breast pumps
  • Chiropractor visits
  • Crutches
  • Eye surgery
  • Guide dog services
  • HMO
  • Home care
  • Diagnostic devices
  • Learning disability services
  • Oxygen
  • Organ donation
  • Optometrist
  • Nursing home
  • Special education
  • Prosthesis
  • Sterilization
  • Equipment to assist the hearing- or vision-impaired
  • Wheelchairs
  • Wigs
  • X-rays

Types of expenses that are generally ineligible include:

  • Controlled substances
  • Childcare
  • FSA
  • Future medical care
  • Personal use items
  • Swimming lessons
  • Veterinary fees
  • Hair transplant

IRS-qualified medical expenses often include:

  • Dermatologist fees
  • Gynecological visits
  • Obstetrician visits
  • Hospital bills
  • Podiatrist visits
  • Prenatal care
  • Postnatal treatment
  • Vaccines

These are not meant to be exhaustive lists, and you should consult with your particular HSA plan to be clear about eligible vs. non-eligible expenses.

Documentation and Recordkeeping for HSA Expenses

Proper recordkeeping is essential when using an HSA. The IRS does not require you to submit receipts with your tax return, but you must retain proof of each qualified medical expense in case of an audit. Documentation should include the date of service, the provider’s name, and a description of the expense.

You can reimburse yourself for qualified expenses incurred after your HSA was established. However, any expenses incurred before the account’s effective date are not eligible. If you mistakenly pay for a non-qualified item, you may return the funds to your HSA before the end of the tax year to avoid penalties.

Digital banking tools provided by HSA administrators often allow uploading receipts and tagging qualified purchases for easier compliance tracking.

Products and Services: Eligible vs. Non-Eligible

You do not generally need a prescription for products that don't contain active medical ingredients. Such non-prescription items that are generally HSA-eligible include:

  • Athletic braces
  • Athletic supports
  • Baby thermometers
  • Blood glucose monitors
  • Blood test strips
  • Blood pressure monitors
  • Condoms
  • Children's first aid
  • Eye glass and contact lens accessories
  • First aid kits
  • Diabetes care items
  • Glucose tablets
  • Home medical equipment
  • Motion sickness aids
  • Nasal spray
  • Heating pads and wraps
  • Sunscreen
  • Denture cream
  • Denture cleansers
  • Shoe insoles and inserts
  • Pregnancy and fertility tests
  • Prenatal vitamins
  • Walking aids
  • Vaporizers
  • Inhalers

In general, you'll need a prescription for HSA-eligible medical items such as:

  • Anti-fungal treatments
  • Lice treatment
  • Anti-itch treatments
  • Acne treatment
  • Allergy medication
  • Cough, cold, and flu medication
  • Children's fever medication
  • Children's pain relievers
  • Baby aspirin
  • Aspirin
  • Chest rubs
  • Ear drops
  • Ear wax removers
  • Cough drops
  • Nicotine gum
  • Oral pain medications
  • Pain relieving creams
  • Wart removers
  • Skin treatments
  • Stomach aids

If you have specific questions or concerns relating to a procedure, it's best to consult with your plan or plan provider. This way, you won't have to pay out-of-pocket for a service you mistakenly believed to be eligible for coverage. Because there are differences between HSAs, FSAs, LCFSAs (limited care flexible spending accounts), and DCFSAs (dependent care flexible spending accounts), some medical issues that are eligible under one plan are not eligible under others. In addition, some treatments are only covered if they're deemed medically necessary. These expenses can range from AA meetings, acupressure, and adult day care to defibrillators and disposable underwear.

Over-the-Counter (OTC) Products and Prescriptions

Recent updates to federal law have expanded HSA eligible expenses to include a broader range of over-the-counter (OTC) medications and menstrual care products without requiring a prescription. This change makes it easier for individuals to manage everyday healthcare needs using their HSA funds.

Examples of OTC HSA-eligible items include:

  • Cold and allergy medications
  • Pain relievers (such as acetaminophen or ibuprofen)
  • Menstrual products (pads, tampons, menstrual cups)
  • Sunscreens with SPF 15 or higher
  • First-aid supplies and thermometers

Products that typically require a doctor’s certification of medical necessity include weight-loss programs, massage therapy, or nutritional supplements when used to treat a diagnosed condition. Always confirm with your plan provider whether additional documentation is required.

HSA Funds and Their Relation to Insurance Premiums

In general, you can't use HSA funds to pay for your health insurance premiums. There are, however, some exceptions.

For employees who elect for COBRA coverage, they may pay for COBRA premiums with their HSA funds. In addition, employees who are enrolled in health insurance (not COBRA) and who also receive unemployment compensation are allowed to pay for their insurance premiums with their HSA funds.

Employees who are 65 years of age or older may pay their premium portion of a health insurance plan provided by an employer with their HSA funds. They may also use their HSA funds to cover Medicare premiums. HSA owners are allowed to use HSA funds to pay for insurance premiums covering long-term care.

Special Circumstances for HSA Use

In addition to COBRA, unemployment, and Medicare-related premiums, there are special circumstances where HSA funds may be used without penalty. These include:

  • Long-term care insurance premiums, within limits set by the IRS based on age.
  • Medical expenses during retirement, as HSA funds can be used tax-free for qualified costs after age 65.
  • Certain out-of-pocket costs abroad, if the service would qualify as a medical expense within the U.S.

If you withdraw funds for non-medical purposes after age 65, you will owe income tax on the withdrawal amount but no additional penalty. Before retirement, such withdrawals incur both income tax and a 20% penalty.

To maximize the benefits of your HSA, consider it both a short-term healthcare fund and a long-term savings tool for medical expenses in retirement.

Frequently Asked Questions

1. What qualifies as an HSA eligible expense?

An HSA eligible expense is a medical, dental, or vision cost used primarily to prevent or treat illness, as defined by the IRS.

2. Can I use my HSA to pay for my spouse or dependents?

Yes. You can use HSA funds for your spouse or dependents’ qualified medical expenses, even if they are covered by a different health plan.

3. Are gym memberships or vitamins HSA eligible?

Generally no, unless prescribed by a doctor to treat a specific medical condition and accompanied by documentation of medical necessity.

4. What happens if I spend HSA funds on non-qualified expenses?

You must pay income tax on those funds plus a 20% IRS penalty, unless you are age 65 or older.

5. Can I use HSA funds after I retire?

Yes. After age 65, HSA funds can be used for any purpose. Qualified medical expenses remain tax-free, while other withdrawals are taxed as income.

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